Mutual funds are shared investments. That means they use money from multiple people to invest in a basket of stocks, bonds, or other securities. Although mutual funds provide an easy way for people to diversify their portfolios, these investors won’t actually own shares of any of the companies the fund invests in. Instead, they’ll own shares of the mutual fund itself, which invests in the companies for them. The result is generally a less risky investment overall—but also a potentially lower rate of return.
> Mutual funds, made simple. (More, w/video)
> What are securities? (More)
Investors can purchase shares of a mutual fund through a brokerage firm, but the most common way people invest is through their 401(k) plans. Most mutual funds have a minimum investment (which can range from $500 to thousands of dollars), but some have no minimums.
> Which are better investments, mutual funds or individual stocks? (More)
> The average returns of the top-performing mutual funds. (More)
The four main categories of mutual funds are stock funds, bond funds, money market funds, and target-date funds. The biggest difference among these four types of funds is the types of securities they invest in. Stock funds, for instance, invest in the stock market. Index funds—which track a specific market index (such as the S&P 500 or Dow Jones)—are among the most well-known types of stock funds.
> Index funds, explained. (More)
> Use this tool to compare different mutual funds. (More)
Discover more:
> The difference between exchange-traded funds and mutual funds. (More)
> Mutual funds date back to the 1920s. (More)
> Can random investments outperform managed funds? (More)
